The Pension Regulator has asked us the question and though the questions asked in a rather woolly way, it’s interesting to see what the Regulator it (him?) self considers the main priorities.
- Appropriate contribution decisions
- Appropriate investment decisions
- Efficient effective administration
- Protection of assets
- Value for money
- Appropriate decumulation options
Each month, a group of like minded people, generally members of the Pension Play Pen, meet in London to thrash out what they think on questions like the one in the title. On Monday (April 4th) we had a cracking debate …
Henry Tapper (12)
The meeting sought to prioritize the Pension Regulator’s 6 positive DC outcomes into those most urgent, those of value and those which tPR could frankly do little about. After an extended voting process involving both alternate and single transferable votes we concluded that
1 tPR needed to concentrate on getting “appropriate contribution decisions” and “efficient and effective administration (6 votes each)
2. tPR could positively influence “appropriate decumulation decisions” and get consumers better “value for money” (6 votes each)
3. It was generally agreed that there wasn’t much tPR could do to influence “appropriate investment decisions” or provide “protection of assets” beyond what was already being done and this was not an area it should prioritize.
Excellent contributions all round, the next meeting will be on Monday May 9th- same time , same place.
There was an interesting comment from Phjilip Bretnall (formerly at the tPR) which echoes both the substance and structure of the conclusions we came to.
“A good outcome is that members of schemes are informed well enough to have a basic understanding of the need to contribute as much as they can afford as their life progresses. It is incumbent on the so-called experts to ensure that good governance prevails and that when benefits crystallise they can benefit from a minimum of a “guided choice” to ensure they have at least thought of the matters that can influence their income into
retirement. From what I see smarter investing may add some extra income at the end but the main driver HAS to be get contributing!”
Nigel Ferrier made some interesting points about the need for good communication . We concluded that without awareness of and engagement with the Regulator’s six issues, any improvements in points 2-6 would not feed through into higher contributions (the main driver of better outcomes).
My own conclusion is that without the communication of the improvements that are being made in the quality of the DC plans – including investment, administration, charges and in decumulation, DC pensions will continue to be regarded as a necessary evil . So I agree with Nigel that the 7th positive DC outcome should be the communication that the other six are being addressed!
To finish - two insights from Alan Higham which add a little extra texture and a bit of fun!
The Regulator’s greatest opportunity to make a difference is in helping people to make appropriate decumulation decisions.
Teaching people how to invest is like teaching a pig to sing
So what do you think? What is the role of Government in establishing better DC outcomes, do you agree with the conclusions we came to or have we got it all wrong?
- What we can and cannot do (to provide our staff with better DC pension outcomes) (henrytapper.com)
- The State can take longevity risk. (henrytapper.com)
- Who is NEST’s default strategy protecting? (henrytapper.com)
- What really matters -DC outcomes (henrytapper.com)
- A blueprint for DC pensions (henrytapper.com)